We can expect a varying pattern of mostly informal, sometimes formal, compacts between nations around different issues. We have seen this already with different groupings forming around the struggles for national sovereignty and survival in Israel and Ukraine. We also see it in the uneven attendances, discords and blurred objectives of many existing multinational bodies, from the G7 to the BRICS. The key absences, and the lack of consensus, at the recent G20 finance meeting in South Africa in February shows how unstable existing international orderings tend to be.
Moreover, the world economy is already ruptured. The Global Trade Alert (GTA) is the most-referenced independent trade-policy-monitoring organisation. It was launched in June 2009 after concerns that national governments were adopting beggar-thy-neighbour protectionist policies in the fallout from the financial crisis.
The GTA has shown that the average annual number of harmful interventions impacting trade tripled between 2009-11 (252 per annum) and 2017-19 (724 per annum). In the most recent three-year period (2022-24), the amount of protectionist activity has rocketed again, to an average of 2,260 interventions a year. That’s a near 10-fold increase since the global financial crisis. These international frictions are bound to grow as Western governments try to revive their atrophied economies.
Globalisation has certainly become more troubled and fragmented. Differences over economic policies and frictions between countries, not least within the old Western bloc, have become sharper. Yet the death of globalisation is most certainly being exaggerated. There has been no collapse in international trade or investment to substantiate claims of ‘deglobalisation’. Both trade flows and foreign investment stocks continue to grow, even if not as quickly as in some earlier spells. The amount of foreign direct investment relative to world output has risen pretty consistently over the past three decades despite all the economic shocks: from 10 per cent in 1990 to 32 per cent on the eve of the financial crisis to 40 per cent the year before the pandemic and to 43 per cent in 2023.
Cross-border linkages took a long time to establish and become embedded. They will also take time to change, whether by economic pressures or political edicts.
Global, regional and national supply chains are not built within a few months. They are complex and have been established over years, and often decades. Even when political pressure is applied to ‘reshore’ or ‘nearshore’ production and supply chains, as we have seen from successive US administrations, this isn’t like flicking a switch. As the US Council on Foreign Relations explains: ‘Far-reaching state ambitions – such as developing strategic industries and shifting supply chains – will take years to achieve, even if interventions are wildly successful.’
A particular firm can make an expensive decision to re-establish some of its production operations in the US, just as Apple or Caterpillar have done. But that doesn’t mean the company has shed its substantial investments abroad, or that it is immune from overseas supply chains. This shows that complete national self-sufficiency in production, and all the required components, is a chimera. No country has been fully self-sufficient since the development of world markets. Trade, capital and financial flows will simply continue to adapt to this more volatile world.
The existing economic trends towards regionalisation will continue, maybe at a slightly faster pace. Protectionist policies – including subsidies, regulatory barriers as well as tariffs – can reshape cross-border economic interactions. But this does not necessarily mean there will be less trade overall. It may simply lead to different patterns of trade.
So we haven’t moved into a ‘new era’. And escalating tariffs won’t on their own set us on an inexorable path to the next world war, either. But this is a more perilous world, not least because Western leaders are so perplexed about what is happening, and don’t yet know how to assess and pursue their national interests.
The Trump Derangement Syndrome of the elites does not help. It stops policymakers from seeing the wood for the trees. Commentators warning about the risk of Trump initiating a trade war should take a breather and look at the data. They would see that he’s continuing a trend of escalating protectionism that began under President Barack Obama. Indeed, between 2009 and 2024, the US applied more harmful trade measures than any other nation.
Obsessively despairing over Donald Trump’s White House is a waste of time. It relieves policymakers of the hard task of thinking more deeply and creatively – both about how to understand this more fluid world and, more importantly, how to shape it for the better.
Phil Mullan’s Beyond Confrontation: Globalists, Nationalists and Their Discontents is published by Emerald Publishing. Order it from Amazon (UK)
